Buyers Can Put Brakes On Cost Drivers

New technology helps risk managers enhance expense oversight capabilities

In workers' compensation programs across the country, risk managers are struggling to round up the usual suspects behind cost hikes--medical, indemnity, administration and litigation expenses.

At the same time, workers' comp managers who are balancing a full plate of responsibilities have chosen to outsource specific functions to external parties--such as claims management, medical management and litigation management.

Although utilizing these third-party vendors has significant benefits--including saving an organization the time, money and hassle of managing processes internally--many risk managers feel they've lost direct control over the cost and performance of their programs.

To ensure optimal outcomes and program success, they must develop an enhanced oversight capability that tightly manages performance, controls quality, and provides continual guidance to vendors in regards to program improvements. Today, technology is a critical enabler of the ability to oversee high-cost service areas.

Claims Management

Processing workers' comp claims requires the participation of multiple parties, including examiners, nurse case managers, physicians and attorneys. These entities are usually spread out over a distributed environment and often use disparate information systems, which can create lags in communication and collaboration.

Today, new claims technology connects these stakeholders and their related applications, allowing information to be shared in real-time across the claims chain.

This connectivity maximizes efficiency through an automated and electronic workflow. Customized business rules ensure cost-saving procedures and best practices are consistently carried out.

Rather than waste 20 percent of adjusters' time on administrative functions, they can now focus on tasks that directly affect the program's bottom line, such as claims investigations and case management.

Most importantly, the latest Internet-based platforms provide organizations with powerful oversight capabilities. These systems leverage the Internet to create a centralized hub that captures and collects data in one location, providing risk managers with an enterprise perspective and an enhanced capability to direct their programs.

For instance, workers' comp managers can perform concurrent, online audits of 100 percent of their claims, rather than the traditional retrospective sampling of 20 percent of claims.

Risk managers can ensure best practices are applied through special handling instructions the third-party administrator must adhere to, and use technology to monitor the regular performance of this as well. This enables a higher level of uniformity in the quality of claims handling.

Risk managers can also run their own analytical reports without having to rely on the TPA. These reports contain the specific, drill-down information needed to implement timely interventions that save money and reduce losses.

Through this oversight function, risk mangers are able to cultivate accountability in special handling procedures, resulting in a claims process that goes beyond administration and settlement of claims to a process that adds value and saves costs.

Medical Management

Double-digit medical inflation has affected workers' comp programs nationwide. Medical costs now account for more than 50 percent of the average claim. As a result, the approach to controlling medical costs must be four-fold:

o The most critical component to effective medical management is using an appropriate network of physicians who understand workers' comp requirements, return-to-work objectives and releasing patients to modified duty.

Today's latest data analysis tools can help organizations profile physicians to pinpoint providers with the lowest overall claims costs and best outcome-oriented results. When workers are injured, technology helps direct these patients to preferred providers in the established network, ensuring the best delivery of care and the greatest level of discounts.

o Nurse case managers must be more effectively incorporated into the workers' comp process.

They should immediately be notified of urgent claims activity, so they can accompany the employee to the initial medical visit, begin communication about RTW expectations and transitional work assignments, and help direct care to the extent allowed by the jurisdiction.

Many of today's nurse case managers are mobile or work from home. The latest Internet technology allows them to access claims and medical information securely, at anytime from anywhere.

o Medical bills must be effectively reviewed to ensure medical costs are billed in accordance with fee schedules and provider discounts for additional savings.

Bill review technology can update fees and discounts in real-time, ensuring the highest level of cost-savings. In the past, medical bills and reports were housed separately from claims, creating disjointed knowledge areas which hampered efficiency. Today, medical bills and reports can be scanned in at one location and linked at the claims level to ensure the most claims complete picture.

o In the end, the best way to reduce medical costs and improve overall outcomes is to prevent injuries from occurring in the first place.

To this end, technology streamlines data reporting and analysis. Risk managers can automatically generate and schedule injury reports to be distributed via the Internet, allowing various stakeholders to stay informed of injury-prone areas.

Risk managers can then use this information to establish new policies, procedures and training to prevent future injuries.

Litigation Management

Today, not only is the number of litigated cases growing, but the average settlements also are increasing. Generally, lawyer involvement drives up the cost of claims and reduces the actual benefit paid to the injured worker. As a result, it is in the interest of all parties to reduce litigation and lawyer involvement.

The best defense is obtaining highly qualified and experienced claims professionals to avoid litigation through up-front management. Litigation specialists ensure proper procedures are established to evaluate claims and identify problems early on, so appropriate preventive measures can take place.

When litigation must occur, communication and sharing of information with attorneys must be seamless and ensure the most up-to-date information.

Today, new Internet tools like hyperlinks sent via e-mail allow external users such as lawyers to directly access the information they need. Hyperlinks are secure and access rights are defined by the sender.

For instance, an examiner can e-mail a hyperlink to the defense attorney. By clicking on it, the attorney connects to claims notes and can add information to the system in real-time.

To analyze results, risk managers must be able to document and track judgments for plaintiff and defense counsels to identify trends. This can help them uncover why employees retain counsel and mitigate these factors in the future. They can analyze outcomes for both plaintiff and defense counsels to optimize results.

For example, with plaintiff counsel, risk managers can determine if a firm is targeting their employees or their specific organization. In regards to defense firms, risk managers should know the volume of claims each of their defense firms are handling, so they can understand the billing practices and promote healthy competition.

Organizations may also want to analyze "demand versus amount." In other words, risk managers would analyze the win-rate and types of exposure, and quantify those exposures.

A lot has changed in a few years, but most of the usual suspects in workers' comp cost hikes have stayed the same. The critical new piece is using technology to oversee and tightly manage program costs and performance.

This technology manages timely reporting of injuries, ensures the use of the best network of providers, and guarantees claims handling instructions are consistently followed.

As risk managers struggle to leverage new infrastructure, a centralized hub has evolved that enhances productivity and the ability to analyze cost drivers. With all these components in place, risk managers should be well-equipped to effectively put the usual suspects under lock and key.

Paul Przysiecki is director of risk management at ADP TotalSource Inc. in Alpharetta, Ga. ([email protected]). Randy Wheeler is CEO of Valley Oak Systems in San Ramon, Calif. ([email protected]).

Infographic: Medical scene picture?

Flag: Tip Sheet

Head: What Can Buyers Do?

To better control double-digit medical inflation in workers' comp claims, risk managers can take a number of steps--all of which are enhanced with the wise application of technology:

o Use an appropriate network of physicians who understand how to handle comp claims.

o More effectively incorporate nurse case managers into the workers' comp process.

o Effectively review medical bills to make sure doctor bills are handled according to negotiated fee schedules.

o Improve loss control and safety efforts so that injuries are prevented from occurring in the first place.

Quotebox, with Paul's mug:

"Risk managers must be able to document and track judgments for plaintiff and defense counsels to...help them uncover why employees retain counsel and mitigate these factors in the future."

Paul Przysiecki, Director of Risk Management

ADP TotalSource Inc.

Quotebox, with Randy's mug:

"New claims technology connects stakeholders and their related applications, allowing information to be shared in real-time across the claims chain."

Randy Wheeler, CEO

Valley Oak Systems